HANOI -- A plan by Vietnam to increase tariffs on imported auto parts will hurt a small sector that already faces modest sales and overcapacity, said an executive of General Motors which has a venture in the country.
In the first public comments from GM on an issue that has riled other foreign automakers, William Botwick, executive director of GM's ASEAN operations, said that if the hike goes through, "it will be devastating to the automotive industry in Vietnam."
GM is represented in the communist country through Vietnam Daewoo Motor Co or Vidamco. GM owns the Korean automaker.
Speaking at an Asia Society conference, Botwick cited the proposed boost in imported parts as one example of what foreign investors disliked about investing in the southeast Asian country.
Companies seek predictability, stability and transparency, the executive said.
Last December, the Ministry of Finance without warning said it would increase the duties which in some cases quadruple effective January 1. After vehement protests by Vidamco and 10 other foreign automakers, Hanoi agreed to reconsider.
Last month, it proposed a graduated increase to bring the tax from 20 percent to 30 percent by April 1, 2003 and finally to a 50 percent ceiling by 2005.
Foreign automakers have submitted their responses on that plan, and appear not to have been appeased.
Botwick, who declined to detail Vidamco's reply to the government, said the higher tax would burden an industry already facing "low investment and overcapacity".
A robust second-hand car market also means that despite annual production capacity of approximately 120,000 units of vehicles in Vietnam, just 27,000 domestically built vehicles were sold last year, he added.
Hanoi has said its tariff hike is an attempt to boost the woefully low level of locally made components used by foreign automakers. That level stands at under 10 percent, and Vietnam had a nearly $3 billion trade gap last year.
But Botwick said raising taxes on imported parts would not help lift levels of domestically made ones. "The Vietnam automobile industry is dependent on imports due to a lack of qualified suppliers," he said.